Time to Start Planning Your Required Minimum Distribution

What should you do with your Required Minimum Distribution Email not displaying correctly? [View it in your browser](. Brad Sandoval from Galveston, TX asks: Hi Mitch, I just turned 70 ½ and have to take a Required Minimum Distribution for the first time. I was planning on taking the money as cash, but I don’t necessarily need it right now. Do I have any other options? Mitch’s Response: Thanks for writing, Brad. As we approach the end of the year, Required Minimum Distributions (RMDs) are on a lot of people’s minds, so I’m glad you brought it up. For most people 70 ½ and older who have retirement accounts, RMDs are due by the end of the year, so now is a good time to start planning for it if you haven’t already. Before I answer your question, I’d like to point out that we here at Zacks Investment Management are not tax advisors and are not in the business of providing tax advice. You should always consult a qualified tax specialist regarding tax questions. The information provided below is generalized information and may not be specific to your tax needs. It is very important that you take the correct amount (or more) of your RMD each year, because if you don’t you could get hit with a tax penalty of 50% of the shortfall (unless you can persuade the IRS to waive it for “reasonable cause”, which is difficult to do). But, to answer your question, you do not have to take your RMD as cash. The point in the eyes of the IRS is that the assets leave your retirement account or your qualified plan, so they can tax those dollars. You are not required to spend the cash for living expenses or anything else for that matter. From the sounds of your situation, it could make sense to keep those assets invested. There are a few ways to do that. You could take the RMD as cash, transfer it to your brokerage account, and invest it however you’d like. If you do not want to lose market exposure in the process of taking your RMD, you could actually transfer shares of securities from your retirement account into a brokerage account, so long as the market value of those securities at time of transfer meets your RMD amount. Another potential option would be to convert the entirety of your IRA into a Roth IRA. This move would trigger a taxable event, but it would remove future RMDs. This decision could make sense, for instance, if you had no need for the money but wanted to give it to heirs. It can be a complex process with tax implications, so you should carefully consider it or ask plenty of questions before going forward. Finally, if you have no need for the money and you’re charitably oriented, you may want to consider a qualified charitable distribution (QCD). A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. If you’re over age 70 ½ and you’re fulfilling an RMD, you can use your QCD amount toward your RMD for the year up to $100,000. The best part: the QCD is not included in your gross income and does not count against the annual limits on deductions for charitable contributions. Like the Roth conversion, the rules for QCDs are complex, so please be sure to consult your tax advisor. The final point I’d like to make for all readers is that RMDs do not necessarily only apply to IRAs. They can be applied to any tax deferred, qualified retirement account such as: - Traditional IRAs - SEP IRAs - SIMPLE IRAs - 401(k) plans - 403(b) plans - 457(b) plans - Profit sharing plans - Other defined contribution plans If you have any of those accounts and are over the age of 70 ½, you almost certainly have a Required Minimum Distribution that needs addressing. To give readers an inside look into our investing approach and how it could benefit your financial needs, check out our Guide to Pure Investing. Simply click on the link below to read your free copy: --------------------------------------------------------------- ABOUT ZACKS INVESTMENT MANAGEMENT If you want some ideas on just how position your portfolios accordingly, reach out to us here at Zacks Investment Management and we’ll show you how. Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. We use this independent research and tools we’ve developed to design customized investment portfolios based on each client’s individual needs. WANT TO LEARN MORE ABOUT ZACKS INVESTMENT MANAGEMENT? Here are three ways to get started: 1. Phone Us: 1-800-701-9830 2. 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